China’s increasingly crowded and highly contentious e-commerce market, which is packed with dozens of local and international retailers, is set to get a little more cramped with the news that American department store Macy’s has invested $15 million in the domestic online retailer VIPStore. One of the very few Chinese e-commerce sites strong enough to be considered a leader in the market, VIPStore has been working over the past year to ink exclusive partnerships with fashion brands, and the latest tie-in with Macy’s seems to follow the same lines as the $28 million investment recently made by Neiman Marcus in Glamour Sales Holdings. Starting in spring 2013, the retailer will launch its new branded section on VIPStore’s new, higher-end omei.com, selling its I.N.C. private label collection.

Macy’s Chief Executive Terry Lundgren said in a statement that there is “significant long-term opportunity internationally” for Macy’s and Bloomingdale’s, the company’s upscale chain, and that this deal will help the retailer gauge the Chinese market’s potential.

Chinese shoppers have been able to buy on macys.com since last year, with orders being filled through the United States. Orders made through omei.com will be filled by that company’s facilities in China.

We’ll keep a close eye on this story, particularly as it relates to the new Neiman Marcus site and the broader luxury e-commerce market in China. As Jing Daily noted earlier this week, despite something of a “gold rush” atmosphere in the China online retail industry at the moment, it’s becoming very crowded — and is far from easy money for new entrants:

Following record investment in 2011 and a raft of new entrants joining the market, 2012 has seen the earliest signs of an industry shakeout and announcements by the likes of Net-A-Porter and Neiman Marcus, as well as designers like Alexander Wang, that they’re ready to launch e-commerce options in China. Considering the country’s overall online retail market hit US$121 billion in sales last year,according to Barclays Capital, a 66 percent increase over 2010, and China is expected to become the world’s largest luxury retail as well as luxury e-commerce market by 2015, it’s easy to see why global and home-grown companies continue to pile in.

Taobao Reports Surge In High-End Sales

Chinese shoppers are drawn to online retailers like Taobao for lower prices and greater selection

Speaking of e-commerce, this week Taobao.com, the Alibaba-owned online retail powerhouse, reported that consumers are becoming increasingly comfortable with making higher-end purchases. According to a company statement, Taobao now claims 1.8 million visitors per day to its luxury retail site, global.taobao.com and says that sales have risen 100 percent year-over-year as of late April. As Investors.com writes this week, Taobao’s figures could be heartening for other retailers targeting China’s emerging middle class — a group whose spending on luxury has the potential to slow amid a broader economic slowdown:

[Taobao’s sales figures] might also be good news for Amazon.com, which sells to middle-class consumers in China through its local unit Amazon.cn. EBay, which sells high-end goods online, is also looking to re-enter the Chinese market after closing its website in China in late 2006.

Considering how entrenched Taobao is among Chinese consumers, and the cool reaction they gave to eBay less than a decade ago, we’d be reluctant to assume Amazon or eBay has a chance to compete with Taobao in the luxury sphere. (Though we’re not sure they’d want to, considering how much priority Chinese middle class consumers place on discounts.) Still, growing luxury sales on Taobao are important as they touch on a topic recently brought up by Chinese media figure Hong Huang in her WWD ChinaFile column: whether opening a Taobao shop is a smart move for higher-end Chinese fashion companies (in Hong’s case, her Beijing store Brand New China) or designers. From Hong’s column:

According to a 2011 McKinsey study, fashion is the biggest-ticket item for e-commerce in China. And 36 percent of online spending is about fashion. This is a big number and it is growing fast.

But our first hurdle is “to Taobao or not to Taobao.”

…

[F]or us, there are several major problems:

• Taobao is very mass. Most consumers go to Taobao for bargain basement prices, not for quality or design. It’s not good for our boutique image and branding.

• Too many fake fashion items find their way onto Taobao. This is bad company.

• A lot of the local designers we carry have already opened their own stores on Taobao. It’s a bit weird to compete with our suppliers.

The other option is to set up our shop and hire a team to create a B2C site of our own.

We talked to several e-commerce advisers and they all recommended Taobao…Taobao is definitely a shortcut to bypass a lot of China’s business hassles if you do not have a team on the ground. But branding is difficult or even scary.

Rio Tinto Looks To Expand Into China, Tap Demand For Fashion Jewelry

Diamond demand has skyrocketed over the past decade in China

We’re becoming accustomed to seeing major diamond-focused jewelers like Graff, Harry Winston, Tiffany and Van Cleef & Arpels expanding in the China market, tapping rising demand for the precious stones among wealthy consumers, but the British-Australian Rio Tinto Group thinks middle class demand for lower-priced diamond fashion jewelry is worth a look. According to Diamonds.net, Rio Tinto recently commissioned the global market research company Ipsos to compile reports on Chinese consumer perceptions on the small, affordable diamonds, in advance of an expected expansion into the country. From the article:

‎“[The report included] important findings for Rio Tinto as we are accelerating our marketing investment in ‎the Chinese diamond jewelry market,” said Jean-Marc Lieberherr, the general manager for the ‎sales and marketing of Rio Tinto Diamonds. “It is also good news for diamond manufacturers, ‎jewelry designers, retailers and consumers.”‎

The research showed that Chinese consumers no longer see diamonds as purely a store of ‎wealth or bridal purchase. Rather, diamond fashion jewelry is also desirable and part of a ‎broader trend in China towards “affordable luxury.” The study noted that diamond fashion ‎jewelry is attractive as a versatile accessory for everyday wear and that design is critical to the ‎Chinese consumer when purchasing fashion jewelry.‎